Firms frequently invest in other entities by buying their stock, or equity. Equity accounting relates to the recording of monetary info from a company’s investments in another company. The share of stock possession decides the methodology of accounting that’s used.

Possession at less than twenty percent represents the financier has tiny power over the other company and the investment is accounted for only the price system. Possession over fifty percent creates a holding company relationship and consolidated finance statements are prepared. Continue reading →